Whenever I think about the concept of pooled risk, I get a hard lump in my chest. It speaks of everything that is good and honourable about mankind. A willingness to club together, to ensure that should one of the group hit a run of bad luck, or worse, the money will be there to cushion the blow.
Well, insurance has moved on some way from those early principles, but the concept of pooled risk remains at its core… although only up to a point.
Today, we have different classes of members, who, because they are deemed a higher risk, are charged different amounts. You may be rated according to postcode, age, or gender.
But possibly not for much longer. Over the next few months the European Court of Justice will rule whether setting premiums according to gender breaks sex discrimination legislation, and must cease.
Everyone I have spoken to who works in the industry believes such a prohibition would be madness. Where would it end? Will age factors be next to fall foul of the discrimination thought police, which would have major implications for pensions?
Sorry to have to tell you this, gentlemen ( yes, it usually is gentlemen) but you are woefully misguided. Charging women, who are already seriously discriminated against when it comes to pensions, 5 per cent more to buy the same annuity as a man is ungallant, unjustifiable, and unacceptable.
Insurers charge women more because they can. This is particularly galling when you remember some of the oldest insurers, such as Scottish Widows, were set up specifically to protect women, during the days when we were fighting the French
It runs entirely contrary to the “we are all in this together” pooled risk principle. Furthermore, much of the so-called “reliable data” used to defend gender-based ratings is little more than urban myth.
True, we may pay a few pounds less for life insurance, because we tend to be less fascinated by hairbrained activities men find so hard to resist, and thus less prone to abrupt endings. But when women cash in their pensions and buy an annuity they are fleeced, getting typically between 5 per cent and 8 per cent less than a man. Insurers claim this is because they live longer and therefore cost the company more.
I couldn’t find any statistics breaking down annuity payments by sex, so where is the evidence that women cost companies more? Sticking my finger in the wind, which is probably about as scientific as the average actuary, I guess women account for as little as 10 per cent of private pension funds.
The latest data shows that single women may live longer than single men, but married men live longer than single men. Married women, meanwhile, have their lives cut shorter than their single, divorced or widowed sisters courtesy of their lifelong struggle to keep their husbands alive.
Pensions experts worry if we are forced to unisex annuities, rates will be levelled down, pushing up the price of men’s pensions. Furthermore, with most women relying on their husband’s pension, it is routinely argued they will lose more than they gain.
Why? With women comprising such a small part of the pool, why would it be necessary to push up costs for everyone? A tiny adjustment maybe, but nothing like the full haircut.
As for women relying on their husband’s pensions. This is because most men are too stingy to buy a survivor’s pension for their spouses. If an annuity for the wife started to look better value, more may buy.
Be honest guys. It’s got nothing to do with longevity. Insurers charge women more because they can. Their pots are smaller and therefore more expensive to administer. No one much wants the business. Competition is all about men, with big funds companies are keen to underwrite.
This is particularly galling when you remember some of the oldest insurers, such as Scottish Widows, were set up specifically to protect women, during the days when we were fighting the French. How ironic, that we women now have to look to the French, as well as our other European cousins, to protect us from our own menfolk.
Teresa Hunter is personal finance editor of Scotland on Sunday